Correlation Between Bodal Chemicals and Union Bank

Can any of the company-specific risk be diversified away by investing in both Bodal Chemicals and Union Bank at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Bodal Chemicals and Union Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bodal Chemicals Limited and Union Bank of, you can compare the effects of market volatilities on Bodal Chemicals and Union Bank and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Bodal Chemicals with a short position of Union Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bodal Chemicals and Union Bank.

Diversification Opportunities for Bodal Chemicals and Union Bank

-0.16

Correlation Coefficient

Bodal Chemicals  Union Bank

Good diversification

The 3 months correlation between Bodal and Union is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Bodal Chemicals Limited and Union Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Union Bank and Bodal Chemicals is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Bodal Chemicals Limited are associated (or correlated) with Union Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Union Bank has no effect on the direction of Bodal Chemicals i.e., Bodal Chemicals and Union Bank go up and down completely randomly.

Pair Corralation between Bodal Chemicals and Union Bank

Assuming the 90 days trading horizon Bodal Chemicals is expected to generate 5.14 times less return on investment than Union Bank. In addition to that, Bodal Chemicals is 1.04 times more volatile than Union Bank of. It trades about 0.01 of its total potential returns per unit of risk. Union Bank of is currently generating about 0.06 per unit of volatility. If you would invest  6,904  in Union Bank of on September 29, 2024 and sell it today you would earn a total of  4,883  from holding Union Bank of or generate 70.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.36%
Values	Daily Returns

Bodal Chemicals Limited  vs.  Union Bank of

Bodal Chemicals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bodal Chemicals Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Union Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Union Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Union Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bodal Chemicals and Union Bank

The main advantage of trading using opposite Bodal Chemicals and Union Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bodal Chemicals position performs unexpectedly, Union Bank can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Union Bank will offset losses from the drop in Union Bank's long position.

The idea behind Bodal Chemicals Limited and Union Bank of pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.